Anthem Blue Cross and Blue Shield -- two of the state's biggest health plans -- agreed Thursday to pay a total of $13 million in fines and to offer new health coverage to more than 2,200 Californians the companies dropped after they became ill.

Neither company admitted to any wrongdoing in agreeing to pay the stiffest penalties yet in efforts by state authorities to curb what they view as an abusive practice of investigating and canceling policies after policyholders run up big medical bills.Blue Cross, a unit of Indianapolis-based WellPoint Inc., will pay a $10-million fine to the state Department of Managed Health Care, and it will offer new coverage to 1,770 former members it canceled since 2004 -- no questions asked.

Competitor Blue Shield, a not-for-profit health plan based in San Francisco, will pay $3 million and offer new policies to 450 people whose coverage was rescinded over the last four years.

The insurers also agreed to establish a process for former members to recover medical expenses they paid out of pocket after they were dropped as well as other damages, such as homes or businesses that were lost because unpaid medical debts ruined the former members' creditworthiness.

These fines are apparently not the end of this story.

The settlement came the same day that a congressional committee held a hearing on the cancellation practices of the nation's health insurers and the day after Los Angeles City Atty. Rocky Delgadillo contended in a lawsuit that Blue Shield routinely flouted the law by conducting secret and unfair investigations into members' health histories to find a pretext for dropping them. Delgadillo filed similar suits against Blue Cross and Health Net this year.

'These settlement agreements add up to a raw deal for California consumers courtesy of the DMHC,' Delgadillo said. 'They will not make the victims of this insidious practice whole, they will not require that the companies disclose their wrongdoing, and, in my opinion, they will not adequately punish the companies for their shameful conduct.'

The settlements close the department's investigation into rescissions. But they do not directly affect Delgadillo's lawsuit, which seeks sweeping remedies and penalties in excess of $1 billion.

Nor do they end a raft of suits filed by individuals seeking financial compensation from the health plans that dropped them.

Also pending are investigations by state Insurance Commissioner Steve Poizner into the rescission practices of health plans' preferred-provider-type coverage that involve thousands more canceled policies.

Acknowledging 'certain control deficiencies' among its former senior managers, WellCare Health Plans Inc. of Tampa is revising its financial statements from 2004 through mid 2007 to reflect accounting errors over refunds owed to Medicaid plans in Florida and Illinois.

The changes announced late Monday mean WellCare overstated its net income a total of $28-million in that time span. The company has not filed audited financial statements since mid 2007.

WellCare, which was raided by the FBI in late October, said a special internal committee found that the managed-care company had made 'accounting errors' in its compliance with requirements for Florida Medicaid and Healthy Kids programs, as well as its contract with Illinois Medicaid.

In WellCare's filing with the Securities and Exchange Commission, the company also said it found 'material weaknesses' in internal control over financial reporting.

'Specifically, we have determined that former senior management set an inappropriate tone in connection with the company's efforts to comply with the regulatory requirements' of Florida's contracts, the filing said. Two months after the federal investigation became public, WellCare ousted its top three executives: Todd Farha, chairman, chief executive and president, as well as Paul Behrens, chief financial officer, and Thaddeus Bereday, general counsel.

The company has since appointed new leadership and formed a regulatory compliance committee consisting of only independent directors. WellCare also has separated the posts of general counsel and chief compliance officer. The duties of chief financial and chief accounting officer also have been segregated.

A health insurer that sells mainly to the self-employed agreed Monday to pay $20 million — one of the largest fines of its type — to settle violations found by regulators in a 36-state investigation.

The investigation, prompted by numerous complaints, found that insurer HealthMarkets failed to properly train its sales agents, who didn't always fully disclose the limits of its health policies to consumers and sometimes did not pay for medical services promptly.

HealthMarkets, owned by three private-equity firms including the Blackstone Group, has about 612,000 policyholders in 44 states through its subsidiaries: Mega Life and Health Insurance, Mid-West National Life Insurance and Chesapeake Life Insurance.

The company sells an array of plans, many of which pay only limited amounts toward medical care.

"The severity of their actions certainly warranted that level of penalty. They hurt a lot of people," says Washington Insurance Commissioner Mike Kreidler, whose state and Alaska led the investigation.

Since 2002, HealthMarkets has been fined by at least seven states and faced lawsuits from dozens of policyholders. In 2006, Massachusetts required the firm to reassess denials of policyholders' medical bills dating to January 2002. Maine earlier this year fined the company $1 million and ordered it to return $5.6 million to policyholders.

So goes another typical week in the wonderful world of the managed care business. Please note we most recently posted about WellPoint and its recissionshere. We wrote about the beginning of the WellCare investigation here.

In the 1980s' managed care was advanced as a rationale and humane way to control health care costs while improving quality and access. Since then, managed care organizations and health insurers, which have often become indistinguishable, have consolidated their power. But the result has not been lower costs, better quality or better access. As politics drive increased interest in health care reform, maybe we should think about how deficiencies in the leadership of health care organizations, particularly but certainly not exclusively managed care and health insurance, have undermined their mission. Leadership that encourages retroactive cancellations of policies after their holders get sick; that set an "inappropriate tone" in compliance with government regulations; and that let policies be misrepresented and claims go unpaid must take some blame for rising costs, stagnant quality, and decreasing access. To reform health care, we must reform health care leadership.

Thank You and Good article Fines, Re-Statements, and More Fines - Just Another Week in the Managed Care Business this time, hopefully can benefit for you all. see you in other article postings.

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